ValueAct Capital Management, the activist hedge fund headed by Jeffrey Ubben, acquired a large stake in American Express, according to report from Bloomberg based on information familiar with the matter.
The report indicated that ValueAct’s stake in American Express is less than 5% of the outstanding shares of the credit card company. The hedge fund’s investment is worth approximately $1 billion.
The stock price of American Express climbed more than 6% to $79.74 per share today. The company has approximately $80.3 billion market capitalization.
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ValueAct to pursue shareholder-friendly changes
People familiar with the matter said ValueAct is planning to pursue shareholder-friendly changes at American Express. One of the sources said the activist hedge fund is not yet considering the credit card company as an active core target.
ValueAct perceives American Express as a quality business with growth potential. The activist hedge fund already engaged in preliminary discussions with the leadership of the credit card company. There is a possibility that ValueAct would sell its stake in American Express if it decides against its campaign for long-term changes, according to the person.
A spokesperson for American Express confirmed that the company has been in talks with the activist hedge fund.
“ValueAct is a well-respected firm. We have been speaking with them, as we do with other investors and look forward to continuing a constructive dialogue. At American Express, we are focused on building long-term value for shareholders and are always open to the views and perspectives of our investors, ” according to the spokesperson.
American Express experienced a series of setbacks
American Express suffered a series of setbacks this year. The credit card company lost its partnership with Costco Wholesale Corporation. It was also defeated by the Department of Justice (DOJ) in its legal battle related to its merchant rules. The court ruled that the merchant rules of American Express violate antitrust rules.
American Express CEO Ken Chenault is under pressure to assure investors that the company can recover from the challenges confronting it. American Express boosted its cash rewards to encourage consumers to use the company’s credit card. The company is also seeking new retail partnerships and investing in new technology.
Additionally, the sudden death of its president Ed Gilligan in May prompted American Express to re-evaluate its succession plans. Investors considered Gilligan as a potential successor to Chenault, who has been serving as Chairman and CEO since 2001.
Warren Buffett’s Berkshire Hathaway is the largest shareholder of American Express. Buffett said he was still happy with Chenault’s leadership.